Oil Prices Plummet as Hormuz Deal Hinges on Fee Disagreements

Oil prices fell on Friday as investors weighed the potential for a deal between Iran and Gulf states to reopen the Strait of Hormuz. The proposed agreement aims to allow broader talks to bring an end to the Iran war, but analysts say hostilities are not yet over.

The price drop comes after oil futures settled more than $3 a barrel higher on Thursday as Iran reviewed a bill to ban U.S. and Israeli vessels from the strait. However, earlier in the week, prices fell as a possible solution to the conflict looked more likely, with both benchmarks on course for a weekly loss of more than 9 per cent.

Iran is seeking fees of between 5 per cent and 7 per cent of the price of cargoes from ships using the strait, while Oman is discussing fees of about 3 per cent. The U.S., however, wants no fees at all, with Bjarne Schieldrop at SEB Research saying that 'The structure of the Iran-Oman agreement in its current form and the power it yields to Iran is nothing that (U.S. President Donald) Trump can accept politically.'

Meanwhile, Saudi Arabia expects imminent coordinated attacks from Iraqi militias north of the Gulf state and from Yemen's Houthis from the south under the supervision of Iran's Islamic Revolutionary Guard Corps.